Arthur Hayes believes Fed support for Japanese bonds will help Bitcoin
BitMEX co-founder Arthur Hayes argues that if stress in Japans government bond market forces policy intervention, the Federal Reserve may end up expanding its balance sheet to steady the yen and cap JGB yields. He says that kind of dollar liquidity tends to spill into Bitcoin and could help it break out of a range.
Japan has a problem that is hard to ignore: the yen is soft while government bond yields are climbing. When those two move together, it can start to look like confidence is leaking, and it can also change what Japanese investors do with their money.
Arthur Hayes, the BitMEX co-founder, says the knock-on effects matter for the US. If JGB yields keep rising, Japanese institutions could rotate out of US Treasuries and back into higher-yielding domestic bonds. In his view, that is the kind of pressure that can drag central banks back toward the same tool they always reach for when markets wobble.
In a Wednesday essay, Hayes floated a scenario where the Federal Reserve ends up effectively printing dollars to stabilize both the yen and the Japanese bond market. His proposed mechanism is technical but intuitive: the Fed creates fresh dollar reserves at major banks, sells dollars for yen to strengthen the currency, then uses that yen to buy Japanese government bonds, pushing yields down. On the Fed balance sheet, he says it would show up as an expansion in foreign-currency assets.
Hayes is blunt about why he cares. For Bitcoin to break out of what he called a sideways funk, he thinks markets need another dose of liquidity. If the Fed balance sheet starts growing again, he expects risk assets to respond, with BTC among the main beneficiaries.
He also says he is not front-running the trade. Hayes wrote that he has seen Bitcoin dip as the yen strengthened, and he will not add risk until he can confirm the Fed is intervening by watching the central banks weekly H.4.1 report.
The broader backdrop is already turning softer for the dollar. The US dollar index slid to about 95.6 this week, its lowest level since January 2022, according to TradingView. Hayes takes that as another sign that, if policymakers step in, it could come in the form of more dollars, not fewer.
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